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Pound to South African Rand (GBP/ZAR) Exchange Rate Falls as Covid-19 Vaccine Hopes Buoy Safe-Haven Currencies

October 13, 2020 - Written by John Cameron

GBP/ZAR Exchange Rate Sinks as US Political Uncertainties Fade

The Pound to South African Rand (GBP/ZAR) exchange rate fell by -0.4% today, with the pairing currently fluctuating around R21.466.

The South African Rand (ZAR) has benefited from risk-on markets today with Goldman Sachs saying that there’s a strong chance for the US Democratic presidential Joe Biden to win in November’s US election.

Consequently, demand for risky assets such as ZAR has risen as US political uncertainties fade ahead of next month’s hotly-debated presidential election.

Zach Pandl, an economist at Goldman Sachs, was also hopeful about a Covid-19 vaccine, saying:

‘We are also approaching major news on the two leading coronavirus vaccines: Pfizer has said it expects a “conclusive readout” by the end of October and Moderna has indicated that the first interim analysis of its phase three trials should be available in November. If the vaccines are highly effective, these early results may be sufficient to imply a high probability of emergency FDA approval by year-end.’

As a result, the South African Rand has gained on growing hopes for a Covid-19 vaccine by the end of the year.

If a vaccine were to emerge, demand for risky assets would improve as confidence increases over a recovery for the global economy.

Pound (GBP) Sinks as UK Unemployment Rises in August

The Pound (GBP) fell against the South African Rand (ZAR) today following the release of the latest UK ILO Unemployment Data for August, which rose unexpectedly from 4.3% to 4.5%.

The Guardian’s Economics Editor, Larry Elliott, was mixed in his response to the data, saying:

‘The latest jobless figures were not all doom and gloom. Vacancies were up by nearly 150,000 between the second and third quarters and 20,000 people were added to payrolls in September.

‘These trends look sure to get worse as the economic recovery seen during the summer peters out and the government cuts back on its support for wages. Rishi Sunak’s response to the figures from the Office for National Statistics was telling.’

Today also saw the International Monetary Fund (IMF) nudge up the UK’s GDP forecasts, with expectations of a 9.8% slump in 2020, up from the previous 10.2%.

The IMF said that this was due to a ‘somewhat less dire’ April-June quarter.

GBP/ZAR Forecast: Lack of Brexit Progress Could Drag Down Sterling

South African Rand (ZAR) investors will be looking ahead to tomorrow’s South African Retail Sales report for August. If these confirm forecasts and plummet by -13%, then we could see ZAR shed some of today’s gains.

The ZAR/GBP exchange rate will remain sensitive to global risk sentiment. As a result, the South African Rand could sink on any further signs of US political uncertainty, or rising Covid-19 cases throughout Europe.

Pound (GBP) investors will be paying close attention to the Bank of England’s (BoE) Chief Economist Andy Haldane tomorrow. Any dovishness about the British economy in his speech would prove GBP-negative.

The GBP/ZAR exchange rate will continue to be driven by Brexit developments this week. If the UK and EU fail to progress on a post-Brexit trade deal, then Sterling would suffer.

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